The Empirical Research Of The Influence Of Institutional Investors On Corporate Performance

●Background and purposeGenerally speaking, the level of institutional investor's development is an important criterion of weighs a capital market's degree of development.In the capital market of Western country, institutional investors have become the leading force and played an important role in keeping the stability of capital market and enhancing corporate governance. In recent years, under the support of our Government, institutional investors have made tremendous progress, especially along with the reform of the shareholder structure and the implementation of state-owned shares extension,the ratio of circulation stocks in total stocks market gradually increases and the proportion of institutional investor's holding steady increases.The practice of Western countries shows that institutional investors are able to exert a positive influence on listed companies and promote the level of corporate governance when the proportion of stock owned by institutional investors reached to a certain level.With the rapid expansion of the size of institutional investors,the active wish of involving in corporate governance to protect their own interests and get long time income is more and more obvious. This paper aims to discuss and analyze the effect of institutional investors participate in corporate governance in order to provide theoretical support which is useful to the further development of China's institutional investors.●Main contents and research conclusionsIn this paper we study the influence of institutional investors on corporate governance and corporation performance.This paper is mainly divided into six chapters.In the first chapter we introduced the background, research significance and so on. In the second chapter we reviewed the related literature in China and foreign country to identify the advantages and disadvantages of previous studies; than we proposed the breakthrough point of this article based on the literature.In this paper, we mainly through the following two aspects to research:Firstly, we study the effect of institutional investors by participating in corporate governance to improve the level of corporate governance and further improve corporate performance;secondly, we study the check and balance of institutional investors to corporate performance.In the third chapter, we introduced and analyzed the definition, the scope of institutional investors in this paper, the characteristics of institutional investors, the development history and status, the classification and the investment characteristics of institutional investors in China. In the fourth chapter we mainly analyzed the theory of institutional investors participate in corporate governance and summarized the way of institutional investors participate in corporate governance and thus affect the corporate performance.In the chapter we firstly analyzed the relationship between corporate governance and corporate performance, and then analyzed the principal-agent theory, stakeholder theory, and cost-benefit theory which are the elementary theories about institutional investor's effort on listed companies.We described the motives of institutional investors participate in corporate governance from an. economic perspective which lay a theoretical foundation for the following empirical analysis.In the fifth chapter we carried on the empirical test and analysis based on the theoretical analysis.In the chapter we presented four hypothetical:(1) Institutional investors are helpful to improve corporate governance and the proportion of stock owned by institutional investors has positive correlation with the level of corporate governance;(2) The check and balance of institutional investors has positive correlation with corporate performance;(3)The proportion of stock owned by institutional investors has positive correlation with corporate performance;(4) The corporate governance of listed companies which stocks are owned by institutional investors is superior than the company which stocks are not owned by institutional investors.In the sixth chapter we drawn the research conclusion and proposed the policy that to develop institutional investors and the shortcoming in the study.In the fifth chapter in order to confirm the influence of institutional investors on corporate governance and corporate performance we constructed Corporate Governance Index to measure the level of corporate governance,we use EPS and ROA to measure corporate performance and with the natural logarithm of total assets,asset-liability ratio and growth rate of operating income to measure company size, capital structure and growth ability. The research sample is the corporate which to be listed in Shanghai and Shenzhen during 2005-2007, using some empirical research methods such as regression to study how institutional investors affect corporate performance. The results are that the proportion of stock owned by institutional investors has positive correlation with the level of corporate governance, indicating that institutional investors are helpful to corporate governance;The check and balance of institutional investors has positive correlation with corporate performance, indicating that the increasing of the proportion of stock owned by institutional investors is helpful to improve the ownership structure of listed companies,checks and balances the interests of major shareholders thereby enhancing company performance;Based on the two assumptions in front of we find that the proportion of stock owned by institutional investors has positive correlation with corporate performance;indicating that institutional investors are helpful to the enhancement of corporate governance;By comparing the sample we found that the corporate governance of listed company which stocks are owned by institutional investors is superior to the company which stocks are not owned by institutional investors which further confirmed that institutional investors are able to enhance corporate performance.●Main research contribution,suggestions and deficienciesThe conclusion of the paper is that institutional investors are able to enhance the level of corporate governance and corporate performance.In the course of the study we draw on some of the experiences of previous studies and we also made some innovation, such as taking the institutional investors which are belong to the top ten shareholders as research object, taking into account the lagging effects of institutional investors,inspecting the check and balance of institutional investors to corporate performance and so on.In terms of proposal we mainly put forward four proposals.First, relax the constraints of institutional investors into the capital market;Second, optimize the institutional investors, foster and develop long-term value investors;Third, introduce relevant policies,allowing long-term value investors to participate in restructuring and reorganizing of state-owned enterprises;Fourth, guide institutional investors to participate in corporate governance.The proposals are to create a favorable policy environment and market environment for the development of institutional investors and play their role in improving company performance.The deficiencies of the paper are that we didn't study the various types of institutional investor's influence on corporate performance,failed to analyze the impact of stock selection on the conclusions of the study and the control variables are considered too few in the regression model.